TIDMAIEA
RNS Number : 1584R
Airea PLC
04 March 2021
Airea plc
Final results for the year ended 31st December 2020
Strategic Report
Airea plc is pleased that the group has been able to remain open
for business throughout the year navigating its way through the
most unpredictable and volatile of years driven by the Covid-19
pandemic and Brexit transition phase. This has caused unprecedented
market conditions which have proved to be extremely disruptive.
During this turbulent political and economic year the group
benefitted from the improved operational and supply chain processes
implemented during the previous 12 months enabling the group to
navigate and mitigate these challenges and continue to prepare the
group for growth opportunities when they arise.
Highlights for the year
-- Increased year-end cash balance from GBP3.0m to GBP6.6m
(GBP3.9m excluding CBILS loan of GBP2.75m);
-- Profitable during the Covid-19 pandemic;
-- Underlying gross profit margins (revenue less cost of sales) increased year on year;
-- Three new product launches during the year.
Principal activity and strategy
The group remains focused on the design, manufacture, marketing
and distribution of floor coverings. Our approach to strategy is
uncomplicated; to develop products that sell, exploit the strength
of our combined manufacturing and distribution operation and
deliver robust cash flows to support the ongoing investment in the
business.
Overview
After a strong start in the first quarter the effects of the
Covid-19 pandemic and various national and regional lockdowns had a
significant impact on the groups ability to trade. Whilst the group
remained open for business throughout the year management had to
reassess its strategic priorities and made the decision to
prioritise cash and working capital to provide the best defence
against uncertainty. This did not stop the group looking to the
future and continuing to develop new products to provide
opportunities for growth.
The group was able to take advantage of the Covid-19 support
provided by the UK government and the group's banking partner to
help during the period including:
-- A six-year CBILS loan of GBP2.75m with no fees, interest or
repayments for the initial 12-month period
-- Capital repayment holiday for 6 months on existing long-term loan
-- Extended overdraft from GBP0.5m to GBP1.0m
-- Q1 2020 VAT payment deferred until 2021
-- Furloughed employees throughout the year
All of these initiatives have helped to bolster the financial
performance of the group; however, due to the market conditions
revenues were below prior year particularly with regards to export
sales. This generated a significantly lower operating profit
although we are pleased that underlying gross profit margins
actually increased year on year.
The group continued to develop new products, although product
launches were pushed back to the fourth quarter and early 2021. It
is too early to see any benefits of the new product launches on the
performance of the group; however, the feedback from customers has
been extremely positive and bodes well for their success in 2021
and beyond. There was a small increase in inventory at the year-end
due to the manufacture of new product launch stock.
Despite the pension scheme deficit increasing slightly to
GBP1.8m from GBP1.5m the group considered its investment strategy a
success in limiting the impact the Covid-19 pandemic could have had
on the deficit. There continues to be volatility in global equity
markets with the scheme's investment strategy constantly under
review to mitigate the scheme's long-term risk profile as much as
possible.
The value of our investment property increased from GBP3.6m to
GBP3.7m. The gain is highlighted separately in the income
statement.
Group results
Revenue for the year was significantly below prior year at
GBP14.6m (2019: GBP19.2m) as the Covid-19 pandemic had a
significant impact on market demand. As a result operating profit
before valuation gain decreased to GBP0.7m (2019: GBP2.2m).
Underlying gross profit margins increased year on year and the
group benefitted from furlough savings (GBP0.5m) which helped to
reduce overheads compared to the prior year even after the
additional Covid-19 related costs of GBP0.1m safeguarding the
employees and site.
There was an unrealised valuation gain on the investment
property of GBP0.1m (2019: GBP0.2m) giving an operating profit
after valuation gains of GBP0.9m (2019: GBP2.4m).
Other finance costs relating in the main to the defined benefit
pension scheme were GBP0.4m (2019: GBP0.4m).
After a tax charge of GBP0.1m primarily due to deferred tax on
the pension scheme, partial unwinding of the deferred tax asset as
brought forward losses are utilised and unrealised valuation gain
on the investment property (2019: GBP0.4m) profit attributable to
shareholders of the group for the year was GBP0.4m (2019: GBP1.6m).
Earnings per share were 1.00p (2019: 3.97p).
Operating cash flows before movements in working capital and
other payables were GBP1.5m (2019: GBP2.7m). Working capital
decreased by GBP0.8m (2019: GBP0.4m) following a reduction in trade
receivables and increase in trade and other payables. Contributions
of GBP0.4m (2019: GBP0.4m) were made to the defined benefit pension
scheme in line with the agreement reached with the trustees based
on the 2017 actuarial valuation. Capital expenditure of GBP0.2m
(2019: GBP0.4m) related to investment in the Ossett site improving
warehouse capacity and machine efficiency.
The group borrowed GBP2.75m under the government Coronavirus
Business Interruption Loan Scheme ("CBILS"). This is a 6-year term
loan with no fees, interest or repayment due for the initial 12
months. The group took a 6-month capital repayment holiday on the
existing long-term loan taken out to acquire shares for the
Employee Benefit Trust. GBP0.4m of the loan was repaid during the
year. The loan is unsecured and repayable over three years in equal
quarterly instalments with five instalments remaining.
No dividend payments were made during the year due to the
Covid-19 pandemic (2019: GBP1.1m) and the Board has decided not to
declare a final dividend for 2020.
Key performance indicators
As part of its internal financial control procedures the board
monitors the key financial metrics of revenue, operating profit,
gross margin, working capital (debtor and creditor days), inventory
turns and cash. These KPI's are reviewed in comparison to previous
year and the budget and analysis undertaken to establish trends and
variances. For the year ended 31st December 2020, operating return
on sales was 5.1% (2019: 11.3%), return on net operating assets was
4.0% (2019: 13.5%) and working capital to sales percentage was
63.4% (2019: 36.0%).
Principal risks and uncertainties
The board has responsibility for determining the nature and
extent of the risks it is willing to take in achieving its
strategic objectives and ensuring that risks are managed
effectively across the group. The board and the management team
meet regularly to discuss the business and the risks that it faces.
Risks are identified as being principally based on the likelihood
of occurrence and potential impact on the group. The group's
principal risks, which remain consistent with the prior year, are
identified below, together with a description of how the group
mitigates those risks.
The key operational risk facing the business continues to be the
competitive nature of the markets for the group's products. To
mitigate this risk the group seeks to improve existing products,
introduce new products and achieve high levels of customer service
and efficiency to attempt to differentiate from the
competition.
The Covid-19 pandemic presents significant uncertainty for the
upcoming financial year with an unknown impact of the virus on the
company's performance. However, the group is well placed to
mitigate this continued risk by drawing on the experience gained
navigating the issues during this year when the group was able to
remain open for business and continuing to take advantage of
available government support. The group can also point towards its
strong balance sheet and cash reserves.
The post Brexit transition export trading conditions present a
short-term risk to the group whilst the most optimal and efficient
supply route is established to the group's many customers in the
European Union. Whilst the export of goods is initially zero rated
for UK VAT purposes the differing treatment our customers face in
individual countries has made it more difficult for the customer to
import goods into their respective countries. We continue to work
with our customers to find the best solution to the logistical
challenges to ensure continued and smooth trading conditions.
The majority of the group's revenue arises from trade with
flooring contractors and fit out companies. The activity levels
within this customer base are determined by consumer demand that is
created through a wide range of commercial refurbishment and new
build projects. The general level of activity in these underlying
markets has the potential to affect the demand for products
supplied by the group and is subject to seasonal variations. The
group mitigates these factors by closely monitoring sales trends
and taking appropriate action early, along with strengthening the
product range and developing new channels to market, both at home
and abroad, to grow demand across a wider range of markets and
negate the impact of seasonality.
The group operates a defined benefit pension scheme. At present,
in aggregate, there is an actuarial deficit between the value of
the projected liabilities of this scheme and the assets they hold.
The amount of the deficit may be adversely affected by changes in a
number of factors, including investment returns, long-term interest
rate and price inflation expectations and anticipated members'
longevity. Further increases in the pension scheme deficit may
require the group to increase the amount of cash contributions
payable to the scheme, thereby reducing cash available to meet the
group's other operating, investing and financing requirements. The
performance and risk management of the group's pension scheme and
deficit recovery plan are regularly reviewed by both the group and
the trustees of the scheme, taking actuarial and investment advice
as appropriate. The results of these reviews are discussed with the
board and appropriate action taken. Following the triennial funding
valuation of the group's pension scheme as at 1st July 2017, a
revised deficit recovery plan was agreed. Under the plan, the
company will continue to make annual contributions of GBP0.4m to
allow a gradual reduction in investment risk. The next triennial
funding valuation will be drawn up to 1st July 2020 and completed
within the permitted 15-month period.
Other risks
Raw material costs are a significant constituent of overall
product cost and are impacted by global commodity markets.
Significant fluctuations in raw material costs can have a material
impact on profitability. The group continuously seeks out
opportunities to develop a robust and competitive supply base,
substitute new materials, agree fixed pricing where possible,
source material with improved and shortened lead times and closely
monitors selling prices and margins making adjustments when
necessary.
The global nature of the group's business means it is exposed to
volatility in currency exchange rates in respect of foreign
currency denominated transactions, the most significant being the
euro. In order to protect itself against currency fluctuations the
group has taken advantage of the opportunity to naturally hedge
euro revenue with euro payments utilising foreign currency bank
accounts. No transactions of a speculative nature are undertaken.
Other risks include the availability of necessary materials,
business interruption and the duty of care to our employees,
customers and the wider public. These risks are managed through the
combination of quality assurance and health and safety procedures
and insurance cover.
Management and personnel
We continue to recognise the hard work and dedication our staff
have applied during this most challenging of years working through
the Covid-19 pandemic and uncertainty it has brought to them and
their families. We look forward to the contribution they can make
going forward in the future of the company.
Current trading and future prospects
The continued investment in our successful commercial flooring
business provides significant opportunities for profitable growth;
however, the Covid-19 pandemic and nationwide lockdowns continue to
suppress market activity on a global basis. We expect this to
impact demand for the foreseeable future. The group has flexibility
and can adapt to these unprecedented times and will continue to
invest in new products throughout 2021 based upon our confidence in
the future prospects of the business during and particularly post
the Covid-19 pandemic.
MARTIN TOOGOOD NEIL RYLANCE
Chairman Chief Executive Officer 4th March 2021
Enquiries:
Neil Rylance 01924 266561
Chief Executive Officer
Paul Stevenson 01924 266561
Group Finance Director
Peter Steel 020 7496 3061
N+1 Singer
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
The financial information set out in the announcement does not
constitute the group's statutory accounts for the 12 month period
ended 31 December 2020 or the 12 month period ended 31 December
2019. The financial information for the 12 month period ended 31
December 2019 is derived from the statutory accounts for that year
which have been delivered to the Registrar of Companies. The
auditors reported on those accounts; their report was unqualified
and did not include any statement under s498(2) or s498(3) of the
Companies Act 2006. The consolidated balance sheet at 31 December
2020, the consolidated income statement, the consolidated statement
of comprehensive income, the consolidated cash flow statement, the
consolidated statement of changes in equity and the segmental
reporting for the 12 month period then ended have been extracted
from the Group's 2020 statutory financial statements upon which the
auditor's opinion is unqualified and does not include any statement
under s498(2) or s498(3) of the Companies Act 2006.
The announcement has been agreed with the company's auditor for
release.
Consolidated Income Statement
Year ended 31 December 2020
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
Continuing Operations
Revenue 14,554 19,183
Operating costs (14,090) (17,297)
Other operating income 280 280
Operating profit before valuation gain 744 2,166
Unrealised valuation gain 125 200
--------------------------------------------- ------------ ------------
Operating profit 869 2,366
Finance income 7 6
Finance costs (376) (411)
_______ _______
Profit before taxation 500 1,961
Taxation (109) (403)
_______ _______
Profit attributable to shareholders of the
group 391 1,558
_______ _______
Consolidated Statement of Comprehensive Income
Year ended 31 December 2020
2020 2020 2019 2019
GBP GBP GBP GBP
Profit attributable to
shareholders of the group 391 1,558
Items that will not be
classified to profit or
loss
Actuarial (loss)/gain recognised
in the pension scheme (389) 2,172
Related deferred taxation 74 (369)
(315) 1,803
Items that will be reclassified
subsequently to profit
or loss when specific conditions
are met
Revaluation/(impairment)
of property 37 (17)
Related deferred taxation (4) 3
------ ------ ------ --------
33 (14)
Total other comprehensive
(loss)/income (282) 1,789
Total comprehensive income
attributable to shareholders
of the group 109 3,347
------ ------ ------ --------
Consolidated Balance Sheet
Year ended 31 December 2020
2020 2020 2019 2019
GBP'000 GBP'000 GBP'000 GBP'000
Non-current assets
Property, plant and
equipment 4,271 4,229
Intangible assets 54 39
Investment property 3,725 3,600
Deferred tax asset 920 847
Right-of-use-asset 1,086 1,233
_______ _______
10,056 9,948
Current assets
Inventories 5,622 5,461
Trade and other receivables 1,712 2,112
Cash and cash equivalents 6,555 2,957
_______ _______
13,889 10,530
_______ _______
Total assets 23,945 20,478
_______ _______
Current liabilities
Trade and other payables (2,895) (2,412)
Provisions (465) (320)
Lease liabilities (243) (329)
Loans and borrowings (1,071) (562)
_______ _______
(4,674) (3,623)
Non-current liabilities
Deferred tax (609) (457)
Pension deficit (1,789) (1,472)
Lease liabilities (188) (323)
Loans and borrowings (2,641) (724)
_______ _______
(5,227) (2,976)
_______ _______
Total liabilities (9,901) (6,599)
_______ _______
Net assets 14,044 13,879
_______ _______
Equity
Called up share capital 10,339 10,339
Share premium account 504 504
Own shares (1,197) (1,839)
Share based payment
reserve 141 85
Capital redemption reserve 3,617 3,617
Revaluation reserve 3,014 3,048
Retained earnings (2,374) (1,875)
_______ _______
Total equity 14,044 13,879
_______ _______
Consolidated Cash Flow Statement
Year ended 31 December 2020
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
Cash flows from operating activities
Profit for the year 391 1,558
Depreciation 228 206
Depreciation of right-of-use-assets 270 274
Amortisation 38 65
Movement in provisions 145 -
Share based payment expense 56 -
Net finance costs 369 405
Profit on disposal of property, plant and
equipment - (12)
Tax charge 109 403
Unrealised valuation gain (125) (200)
_______ _______
_______ _______
Operating cash flows before movements in
working capital 1,481 2,699
(Increase)/decrease in inventories (161) 1,336
Decrease in trade and other receivables 456 221
Increase/(decrease) in trade and other
payables 467 (1,159)
_______ _______
_______ _______
Cash generated from operations 2,243 3,097
Contributions to defined benefit pension
scheme (400) (400)
_______ _______
Net cash generated from operating activities 1,843 2,697
Cash flows from investing activities
Payments to acquire intangible fixed assets (53) (9)
Payments to acquire tangible fixed assets (233) (378)
Receipts from sales of tangible fixed assets - 136
_______ _______
_______ _______
Net cash used in generated from investing
activities (286) (251)
Cash flows from financing activities
Interest paid on lease liabilities (15) (21)
Interest paid on borrowings (33) (34)
Interest received 7 6
Proceeds from loan 2,750 1,700
Purchase of own shares by the EBT - (2,000)
Principal paid on lease liabilities (344) (343)
Repayment of loan (324) (448)
Equity dividends paid - (1,081)
_______ _______
Net cash received/(used) in financing activities 2,041 (2,221)
_______ _______
Net increase in cash and cash equivalents 3,598 225
Cash and cash equivalents at start of the
year 2,957 2,732
_______ _______
Cash and cash equivalents at end of the
year 6,555 2,957
_______ _______
Consolidated Statement of Changes in Equity
Year ended 31 December 2020
Share Capital
Share premium Share Share redemption Revaluation Retained Total
capital account based Option reserve reserve earnings equity
payment
reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------------------------------- ------------ --------------- ---------- --------------- --------------- ------------ ------------
At 1st January 2019 10,339 504 - - 3,617 3,096 (4,028) 13,528
Comprehensive income for
the year
Profit for the year - - - - - - 1,558 1,558
Actuarial gain recognised
on the pension scheme - - - - - - 1,803 1,803
Impairment of property - - - - - (14) - (14)
---------------------------------------------------- ------------ --------------- ---------- --------------- --------------- ------------ ------------
Total comprehensive income
for the year - - - - - (14) 3,361 3,347
Contributions by and
distributions to owners
Dividend paid - - - - - - (1,081) (1,081)
Purchase of own Shares
by the EBT - - (2,000) - - - - (2,000)
Share based payment - - - 85 - - - 85
Own Shares Transfer - - 161 - - - (161) -
Revaluation Reverse Transfer
- - - - - (34) 34 -
---------------------------------------------------- ------------ --------------- ---------- --------------- --------------- ------------ ------------
Total contributions by and
distributions to owners
- - (1,839) 85 - (34) (1,208) (2,996)
---------------------------------------------------- ------------ --------------- ---------- --------------- --------------- ------------ ------------
At 31st December 2019 10,339 504 (1,839) 85 3,617 3,048 (1,875) 13,879
At 1st January 2020
Comprehensive income for
the year
Profit for the year - - - - - - 391 391
Actuarial loss recognised
on the pension scheme - - - - - - (315) (315)
Impairment of property - - - - - - 33 33
---------------------------------------------------- ------------ --------------- ---------- --------------- --------------- ------------ ------------
Total comprehensive income
for the year - - - - - - 109 109
Contributions by and
distributions to owners
Dividend paid - - - - - - - -
Share based payment - - - 56 - - - 56
Own Shares Transfer - - 642 - - - (642) -
Revaluation Reserve Transfer
- - - - - (34) 34 -
---------------------------------------------------- ------------ --------------- ---------- --------------- --------------- ------------ ------------
Total contributions by and
distributions to owners
- - 642 56 - (34) (608) 56
---------------------------------------------------- ------------ --------------- ---------- --------------- --------------- ------------ ------------
At 31st December 2019 10,339 504 (1,197) 141 3,617 3,014 (2,374) 14,044
---------------------------------------------------- ------------ --------------- ---------- --------------- --------------- ------------ ------------
In accordance with Rule 20 of the AIM Rules, Airea confirms that
the annual report and accounts for the year ended 31 December 2020
and notice of Annual General Meeting ("AGM") and related proxy form
will be available to view on the Company's website at
www.aireaplc.co.uk on 5 March 2021 and will be posted to
shareholders by 19 March 2021. The AGM will be held on 12th May
2021, at 2.00 p.m. at the company's registered office at Victoria
Mills, The Green, Ossett, West Yorkshire, WF5 0AN. Due to the
ongoing Covid-19 pandemic and government "stay at home" measures
this will be a closed meeting; however, shareholders will be able
to dial in and listen to the AGM. Further details are set out in
the notice of the AGM available within the financial statements
which can be viewed on the group's website.
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END
FR EAXDLEEXFEEA
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March 04, 2021 02:30 ET (07:30 GMT)
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